BOULDER -- Immediate possession will not get an immediate decision in the Dillard's eminent domain case.

After a day-long hearing, the Boulder County District Court recessed without ruling on whether the Longmont Urban Renewal Authority can lay claim to the Dillard's store in the Twin Peaks Mall. LURA wants to have the store's title and take immediate possession, so that an $80 million redevelopment of Twin Peaks Mall can start.

The result means more delay of a project that was supposed to break ground this fall. Final arguments will be submitted in writing on Aug. 2 and 12 by the two sides; a ruling by Judge D.D. Mallard may come later that month.

Dillard's and Longmont are in a court battle over the redevelopment of Twin Peaks Mall. (Times-Call file photo)
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Greg Lindstrom
)

On the city's side, the situation is a row of dominoes. LURA has offered $27.5 million to assist the project. But the assistance depends on mall owner NewMark Merrill Mountain States getting a construction loan. That loan, in turn, depends on NewMark holding the Dillard's title, LURA attorney Robert Duncan said.

"The clock is ticking," NMMS managing partner Allen Ginsborg testified. "We've received notice from a couple of our existing tenants that they're going to terminate their leases. We're going to be effectively vacant by the end of the holidays this year, if not sooner."

Dillard's holds a spotlight role because it owns its own building and has an agreement giving it veto power over any rebuild of the mall. Negotiations to either buy the store or include it in the project fell through earlier this year.

State statute allows title to be vested before a price has been reached on a condemned property. But Dillard's attorney Leslie Fields argued that the statute was unconstitutional, and that the store had a right to be heard by a jury before surrendering its rights over the property

"Allowing these rights to be thrown away, we believe, is contrary to the Colorado Constitution and to Colorado jurisprudence," she said.

She also claimed the blight decision was made in bad faith and that, contrary to state law, Longmont's actions had been motivated by dollars and cents rather than an honest effort to cure blight.

Blight studies on the mall were prepared in 2007, 2009 and 2012. The most recent, performed by economic development director Brad Power and redevelopment manager David Starnes, found 10 of 11 statutory blight conditions had been met.

Those conditions included the Dillard's lease making the property "unmarketable" because of the veto conditions. In cross-examination, Starnes said he had not read the lease.

Starnes said the 2012 study found 158 instances of blight throughout the mall, including on the Dillard's property. That's slightly less than the 170 found in the 2009 study. The study did not include an interior inspection by Starnes or Power.

Ginsborg said the veto power given by Dillard's agreement was less and less common in modern malls, a contention disputed by Dillard's vice president for real estate Chris Johnson, who oversees more than 300 stores.

"Every store I have has these kinds of agreements," he testified. "Every new store I have has these kinds of agreements. ... Mall developers actually draft these things and send them to us. These approval rights are in the first draft I get from a developer. ... It's just a way to protect our investment."

Johnson described Ginsborg as unyielding in his negotiations. Some details of Ginsborg's plan, he said, were less desirable but could have been worked out, such as the intention to have a movie theater right next to Dillard's. Others, he said, were unworkable, such as an insistence on $3.85 per square foot for "common area maintenance" -- shared maintenance costs for the mall as a whole -- when the store had been paying 39 cents, or offering to buy the store for $2.8 million and then lease it back at $1.1 million.

"Do you feel like he was making unreasonable demands?" Fields asked.

"Oh, yes," Johnson responded.

LURA attorney Donald Ostrander, meanwhile, confirmed that neither Johnson nor any other Dillard's representative had challenged the blight finding or attended any of the hearings related to it, or, for that matter, any public meetings related to the mall's new site plan.

"The city council didn't own the mall," Johnson said. "I didn't see where I had need to (attend)."

"If LURA had no input from you ... what specific allegation do you have that supports your 'bad faith' (charge)?" Ostrander asked. "What did LURA do that was in bad faith?"

"Blighted my property," Johnson said.

"What about that determination was done in bad faith?" Ostrander asked.

"That they blighted my property."

While cross-examining Ginsborg, Fields explored other avenues, asking if it was possible for a developer to deliberately let a property go downhill so that he could qualify for financial aid to cure the blight.

"Anything's possible," Ginsborg said.

"In the real world, is it probable a developer would blight his or her own property?" Duncan asked in return.

If immediate possession and title are granted to LURA, work on the mall can go ahead while the court works out how much compensation Dillard's should get. If not granted, work could not proceed until that determination is reached.

A complete dismissal of the eminent domain case would leave Dillard's in possession and NewMark still having to get the store's permission for redevelopment.

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